EXECUTIVE SUMMARY

In the year 1918 the company came into the existence under the name
Government Soap Factory. Shri S.G. Shastri a Science Student went to UK for
higher studies in Oil Technology. After returning to India, he conducted several
experiments. He evolved with a soap perfume blend using sandalwood oil as the
main base to manufacture the toilet soap and thus the famous MYSORE
SANDAL SOAP that took birth in the year 1918. The factory started functioning
in its new premises from 1st July 1957. From this

The initially named Government Soap Factory was renamed as Karnataka

soaps and Detergents Limited in 1st October 1980. Its trademark is
SHARABHA, The Company is a leading Sandalwood soap manufacture in the
country, and they have demand for their products in both domestic as well as
international market.

Objective: This project is under taken with intension to know liquidity, solvency,
profitability and operating and financial risk of the KS&DL by analyzing the
financial statements in the light of accounting ratios.

Scope: Study is designed to assess the financial health of the corporation and
operating and financial risk of the corporation through ratio analysis, Trend
analysis.

Methodology: The relevant data has been systematically analyzed and interpreted
by using above mentioned tools i.e. ratio analysis and trend analysis.

Findings: The following are some of the facts that are found of from analysis of
financial statements.

Profitability of the corporation is fluctuating in trend.

Long term solvency of the company is quite satisfactory.

1
 CHAPTER -1

INTRODUCTION

2
 CHAPTER-1
INTRODUCTION
The subject of financial management is of immense interest to both
academicians and practicing managers. It is of great interest to academicians
because the subjects is still developing , and there are still certain areas where
controversies exist for which no unanimous solutions have been reached as yet.
Practicing managers are interested in this subject because among the most crucial
decisions of the firm are those which relate to finance, and an understanding of
the theory of financial management provides them with conceptual and analytical
insights to make those decisions skillfully.

DEFINITION

Financial management may be considered to be the management of the

finance function.

_Raymond chambers

Business finance can broadly be defined as the activity concerned with

planning, raising, controlling and administrating of funds used in the
business.

_ Guttmann and
Doug Hal

Financing consists with the rising, providing and managing of all the
money, capital funds of any kind to be used in connection with the
business.

_ Bonneville and Dewey

3
NATURE OF FINANCIAL MANAGEMENT

Financial management is that managerial activity which is concerned with

the planning and controlling of the firms financial resources. As a separate
activity of discipline, it is recent origin. It was a branch of economics till 1980.
Still today, it has no unique body of knowledge of its own, and it draws heavily
on economics for its theoretical concepts.

OBJECTIVES OF FINANCIAL MANAGEMENT

The firm investment and financing decisions are unavoidable and continuous.
In order to make them rationally, the firm must have a goal. It is generally
agreed in theory that the financial goal of the firm should be the maximization
of owners economic welfare could be maximized be maximizing the
shareholders wealth maximization is theoretically logical and operationally.

Profit maximization

Wealth maximization

Introduction to Ratio analysis

RATIO ANALYSIS

Ratio Analysis is a very important and potent tool for financial statement
analysis. Ratios aid financial statement analysis because they conveniently
summarize data in a form easy to understand, interpret and compare.

Ratio Analysis is the process of determining and interpreting numerical

relationships based on financial statements. It is a statistical yardstick that
provides a measure of relationship between two variables or figures.
Financial ratios are classified in various ways

a) Solvency ratios

b) Profitability ratios

c) Activity ratio

4
 RATIOS

Classification of Ratios

The use of ratio analysis is not confined to the financial management only. There
are different parties interested in the ratio analysis for different purposes. In view
of several
SOLVENCYof ratios,
RATIOSthere are many types of ratios, which can be
PROFITABILITY RATIOS
calculated
ACTIVITY from
RATIOS
the (MARKETING) (FINANCE)

SHORT TERM RAIOS INVENTORY TURNOVER RATIO

LONG TERM RATIOS GP RATIO DEBTORS TURNOVER RATIO
NP RATIO AVERAGE COLLECTION PERIOD
EPS TOTAL ASSETS TUROVER RATIO
CURRENT ASSETS TURNOVER RATIO
WORKING CAPITAL TURNOVER RATIO

CURRET RATIO
DEBT RATIO
QUICK RATIO
DEBT EQUITY RATIO
CASH RATIO
CAPITAL EMPLOYED TO NET WORTH RATIO

5
 CHAPTER-2

DESIGN FOR THE

STUDY

6
 CHAPTER-2
DESIGN OF THE STUDY
statements are prepared for the purpose of presenting a periodical review of report by the
management in business and result achieved during the period under review. It reflects a
combination of recorded facts accounting conventions and personal judgments.

The main need of the study is to study the financial performance of the company and methods to
evaluate the financial performance of the company.

Finance is the life blood of any organization. The future of any organization depends on the
ability of the organization to make use of its resources in the best way. The information relating
to the financial position of the company is of great interest to management, creditors, investors
and other to have a judgment about the operating performance and financial position of the
stakeholders.

SCOPE OF THE STUDY

The scope of the study covers the previous five years financial reports of the company.

An extensive study is done on the financial performance of KARNATAKA SOAPS AND

DETERDENTS Ltd.

The study concentrates on the profitability position of the firm and the brief study.

The study covers all the financial information of the firm.

The scope of the study is defined below in terms of concepts adopted and period under focus.
First the study of the Ratio analysis is confined to the KARNATAKA SOAPS AND
DETERGENTS Ltd.

Second the study is based onthe annual reports of the company for a period of 5 years from
2006-2007 to 2010-2011 the reason for restricting the study to this period is due to time
constraints.

7
 NEED AND IMPORTANCE OF STUDY

Financial

OBJECTIVES OF THE STUDY

To study the financial performance of the company.
To assess the profitability position of the firm.

To assess the operating efficiency by finding the operating profit and

operating ratio.

To know the collection efficiency.

To evaluate how effectively short terms sources like creditors are used for
working capital requirements.

8
 LIMITATIONS OF STUDY

Confidentiality was a constraint for data collection.

Time is a major constraint as the project was done only for a period of
two month

Window dressing (false results may be possible on incorrect account of

data).

Ratios are only a post mortem of what has happened between two
balance sheet data. They may not exactly reflect the nature.

9
 RESEARCH
METHODOLOGY
In view of the objective of the study listed above, an exploratory research design has
been adopted. Exploratory research is one which is already interpreted and already available
information and it lays particular emphasis on analysis and interpretation of the existing and
available information. It makes use of secondary data.

DATA COLLECTION

The study depends up on primary and secondary data from various sources.

SOURCES OF DATA

The data collected related to the study was divided into two parts.

1. Primary data

2. Secondary data

PRIMARY DATA

First hand information was collected from experts of finance department, on the basis of
which actual position of the company is identified.

SECONDARY DATA

The secondary data is collected from the annual reports, schedules, budgets and other
statements of the company, company websites etc. , Which is provided by the finance
department of KARNATAKA SOAPS AND DETERGENTS Ltd.

10
 CHAPTER 3

INDUSTRY AND
COMPANY
PROFILES

11
 INDUSTRY PROFILE:
Soap is one of the commodities, which have become an indispensable part of the life of modern
world. Since it is non-durable consumer goods, there is a large market for it. The whole soap
industry is experiencing changes due to innumerable reasons such as government relations,
environment and energy problems increase in cost of raw material etc.

Following swadeshi movement in 1905, few factories were set up and they were:

1. Mysore Government Soap factory at Bangalore.

2. Godrej Soaps at Bombay.

THE INDIAN SOAP INDUSTRY SCENARIO:-

The Indian soap industry has been dominated by handful of companies such as

1. Hindustan Lever Limited.

2. Tata Oil Mills (Taken over by HLL)
3. Godrej Soaps Private Limited.
4. Recent entrants include Colgate Palmolive Ltd.,
_ Proctor & Gamble Ltd.,

_ Nirma Soap Works,

_ Wipro Ltd.,

The Indian soaps industry continued to flourish very well until 1967-68, but began to stagnate.
Soon it started to recover and experienced a short upswing in1974. This increase in demand can
be attributed to:-

1. Growth of population.
2. Income and consumption increase.
3. Increase in urbanization.
4. Growth in degree of personal hygiene.
Soap manufactures are classified as, Organized and unorganized sector. KSDL is under
organized sector.

12
COMPANY PROFILE

India is a rich land of forest; ivory, silk, sandal; precious gems are magical charms of
centuries. The most enchanting perfumes of the world got their exotic spell with a twist of
sandal. The worlds richest sandalwood resource is form one isolated stretch of forests land in
South India that is Karnataka.

The origin of sandalwood and its oil in Karnataka, which is used in making of Mysore
sandal soaps is well known as Fragrant Ambassador of India & Sandalwood oil is infact known
as Liquid Gold..

RENAMING:

On 1 st October 1980, the Government Soap Factory was renamed as Karnataka Soaps and
Detergent Limited The Company was registered as a public limited company. Today Company produces
varieties of products in the toilet soaps, detergent, Agarbathies and Cosmetics.

VISION STATEMENT:
Keeping pace with globalization, global trends and the states policy for using technology
in every aspect of governance. Secure all assistance and prime status from Government of India,
all technology alliances. Making available technology product and services at the most
affordable price to the people at large, in keeping with the policy of a welfare state.

MISSION STATEMENT:-
To serve the National economy and to attain self-relianceTo promote purity & quality
products and to maintain the brand loyalty of its customers.

OBJECTIVES OF KSDL:

To serve the national economy

To attain self reliance

To promote and uphold its image as symbol of traditional products

To promote purity and quality products and thus enhance age old charm of Sandalwood
Oil

13
 To build upon the reputation of Mysore Sandal soap based on pure sandal oil

POLICY OF KS&DL: -

Seek purchase of goods and services from environment responsible suppliers.

Communicate its environment policy and best practices to all its employees
implications.

Set targets and monitor progress through internal and external audits.

Strive to design and develop products, which have friendly environmental impact during
manufacturing.

Reuse and recycle materials wherever possible and minimize energy consumption & waste.

SWOT ANALYSIS OF KS&DL

STRENGTHS:

1. Only soap in India that contains pure sandal and almond oil.
2. certified by ISO
3. Worlds largest production of sandalwood oil.
4. Brand name from decades from soap market.
5. It has very good dealership network in south which ensures that the
products reach every customer.
6. Diversified product range helps the company to maintain stability.

WEAKNESS:

1. Distribution network weak in north and east.

2. Absence of television advertisement.
3. Neglecting freshness aspect.
4. High oriented cost due to excessive labor force.
5. Low turnover resulting in low profits.

14
OPPORTUNITIES:

1. Traditional benefits that sandal is good for skin.

2. Skin care is just gaining importance among consumers.

3. Government supports and large production capacity.
4. Advantages of being in the industry for a long time.
5. Existence of vast market and huge demand.

THREATS:

1. Other competitors products such as Rexona, Moti,Santoor etc.

2. There is a need for renovation of plant and machinery.
3. Government policy may reduce growth potential.
4. Other sandal soaps in the market.
5. Entry of new multinationals in soap business.
CLASSIFICATION OF EMPLOYEE AT KS&DL

Permanent Employee: One who has been engaged for work on a

permanent basis.
Temporary Employee: One who has been engaged for work which is
essentially of temporary nature and likely to be finished within a limited
period.
Probationary Employee: One who is provisionally employed to fill a
permanent vacancy.
Casual Workmen: One who is engaged on day-to-day basis for casual
or non-recurring work.
Trainee: Trainee is a learner who may or may not be paid stipend
during the period of training.
MAN POWER DETAILS:
GROUP Bangalore SOD Marketing Duty paid Total
Mysore Branches Godown
Shimoga
Executives
Supervisors
Workers
Total

15
ORGANIZATION STRUCTURE:
Organization structure is a basic framework within which the managers decision
making behavior takes place. The structure gives an established pattern of relationship among the
various components or parts of an organization. It is a vital tool for providing information about
organization relationships
ORGANISATION CHART:

CS

16
 MANAGING DIRECTOR

EXECUTIVE DIRECTOR GEN. MANAGER GEN. MANAGER

(MARKETING) (R&D/P&M) (FINANCE)

DY. GEN MGR DY. GEN MGR

(FTD) (MTLS & Strs)

AGM AGM
(R & D) (HRD)

MGR MGR
(MDs Office) (MIS)

Functional Heads

17
 Shivanad Naik, Ex-Minister & chairman, Chairman

M.K.Baladevakrishna, IAS Managing Director

H.M.Nataraj General Manager (Finance)

S.G.Kulkarni D.G.M (P&M)

P.Ravi D.G.M (Finance)

D.N.Vasanth Kumar D.G.M (Marketing & MID)

C.M.Suvarna Kumar D.G.M (Marketing & Export)

N.S.Prakash Rao D.G.M (PROJECTS, COMPUTERS, HRD

& SOD Mysore)

V.S.Venkatesha Gowda D.G.M (R&D)

B.S.Lokeshaiah D.G.M (Materials)

T.S.Diwakar A.G.M (E&S)/Stores

COMPETITORS OF KS&DL PRODUCTS AND SERVICES:-

KS&DL is facing cutthroat competition in national and international market. Some of

its main competitors are: -

1. M/S. Hindustan Uni Lever Ltd.,

M/S. Godrej Soaps Private Ltd.,

M/S. Proctor& Gamble

M/S. Wipro

18
 M/S. Nirma Soaps Private Ltd.,

M/S. Jyothi Laboratories

TRADEMARK OF KS & DL

The SHARABHA The carving on the cover is the sharabha, the trademark of
KS & DL

The sharabha is a mythological creation from the puranas which has a body of a lion and head
of elephant, which embodies the combined virtues of wisdom and strength. It is adopted as an
official emblem of KS& DL to symbolize the philosophy of the company.

SLOGAN: - Natural products with exotic fragrances

KS & DL has a long tradition of maintaining the highest quality standard, right from
the selection of raw materials to processing and packing of the end product.

The reasons why its products are much in demand globally and are exported regularly
to UAE, Bahrain, Saudi-Arabia, Kuwait, Qatar, South America. The entire toilet soaps of KS &
DL are made from raw materials of vegetable origin and are totally free from animal fats.

BACKGROUND OF KS&DL:-

1918 Government Soap Factory was started by Maharaja of Mysore and the Mysore
Sandal Soap was introduced into the market for the first time.

1950 - The factory output rose to 500 Metric Tons with the following modifications.

1. Renovating the whole premises.

2. Installing new boiler soap building plant and drying chamber.

19
1954 Received license from Government to manufacture 1500 tons of soap and 75 tons of
glycerin per year.

1957 Factory shifted its operation to Rajajinagar industrial area.

1974 Mysore sales international limited was appointed as the sole selling agent, for marketing
its products.

1975 Rs.4 Crores synthetic detergent plant was installed based on Italian technology by
Ballestra SPA. 1980 - On 1st October 1980 the Government Soap Factory was converted into a
public sector enterprise and renamed as Karnataka Soaps & Detergents Limited.

1981 a) Production capacity increased to 6000 tons,

b) Rs.5 Crores Fatty Acid Plant was installed.

1984 Manufacturing of premium quality of Agarbathies at Mysore division.

1985 Production capacity was raised to 26,000 M.Tons Per Annum. A large variety of toilet
soaps at attractive shapes, colors and fragrances introduced to meet the varieties & tastes of
consumers.

1992 The company was registered with the Board for Industries and Financial Reconstruction
(BIFR), New Delhi in December for rehabilitation, as the company suffered losses continuously
since 1980 at its net worth fully eroded.

1996 The BIFR approved the rehabilitation scheme in September & the Company stated
making Profits.

1999 ISO-9002 Certificate for quality assurance in production, installation and Servicing.

2000 ISO-14001 certificate pertaining to environmental management system.

PRODUCT PROFILE
TOILET SOAPS :
NAME OF THE PRODUCT UNITS OF GRAMS

Mysore Sandal Soap 75, 125

Mysore Sandal Classic Soap 75

20
Mysore Sandal Gold Soap 75, 125

Mysore Sandal Baby Soap 75

Mysore Special Sandal Soap 75

Mysore Rose Soap 100

Mysore Sandal Herbal Care Soap 100, 125

Mysore Jasmine Soap 100

Wave Soap 100

Mysore lavender Soap 150

Mysore Sandal bath tablet 150

Mysore Sandal classic bath tablet 150

Mysore Jasmine bath tablet 150

Mysore Special Sandal tablet 150

Mysore Sandal rose tablet 150

Mysore Sandal Guest tablet 17

21
 GIFT RANGE

SBT

SJR

06 IN 01

GOLD SIXER

OTHERS

Washing Half Bar

Washing Sandal Baby Wash

DETERGENTS
NAME OF THE PRODUCT UNITS IN GRAMS
Mysore detergent powder 1000

Mysore detergent powder 500

Mysore detergent Cake 125

Mysore detergent cake 250

TALCUM POWDERS

NAME OF THE PRODUCT UNITS IN GRAMS

Mysore Sandal Talc 20, 50, 100, 300

Mysore Sandal Baby Talc 100, 200, 400

22
AGARBATHIES

NAME OF THE PRODUCTS

Mysore Sandal Premium

Mysore Sandal Regular

Mysore Rose

Nagachampa

Suprabhatha

Mysore Jasmine

Parijatha

Sir M.V.100

Bodhisathva

Venkateshwara

Durga

Ayyappa

Alif Laila

Meditation

SANDALWOOD OIL:

23
In 5ml, 10ml, 20ml, 100ml, 500ml,

2kg, 5kg, 20kg and 25kg packing

POWDERS:
Mysore Sandal Talk: Cooling & Healing, Fragrant freshness, Net. Wt 20gm, 60gm,
300gm and 1kg. Mysore Sandal Baby Powder: Tender loving care for baby& Mummy. Net wt
100-400gms.

REVIEW OF LITERATURE:

To understand the financial performance and condition of a firm, its stockholders look at
three financial statements viz. the balance sheet, the profit and loss statement and the sources and
uses of funds statements. The balance sheet shows the financial position of the firm at a given
point of time. The profit and loss statement reflects the financial performance of the firm over a
period of time typically it is drawn up for a period of one year. The sources and uses of fund
statement portray the flow of funds through the business during a given accounting period.

Financial statement analysis may be done for a variety of purposes, which may range
from a simple analysis of the short-term liquidity position of the firm to a comprehensive
assessment of the strengths and weakness of the firm in various areas. It is helpful in assessing
the corporate excellence judging credit worthiness, forecasting bond ratings, predicting
bankruptcy and assessing market risk.

Ratio analysis is a powerful tool to financial analysis. The ratio analysis involves
comparison for a useful interpretation of the financial statements. A single ratio in itself does not
indicate favorable or unfavorable condition. It should be compared with some standard.
Standards of comparison may consist of part ratios, projected ratios, competition ratios and
industry ratios.

Several ratios calculated from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated as the short and long-term creditors
owners and management are interested in financial analysis. In the finance literature a lot of
importance has been attached to financial ratios for assessing the.

24
 CHAPTER- 4

DATA ANALYSIS
AND
INTERPRETATION

25
 DATA ANALYSIS AND INTERPRETATION
LIQUIDITY RATIOS

CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and
is also most widely used to make the analysis of a short-term financial position (or) liquidity of a
firm

Current Ratio = Current Assets/Current Liabilities

A relatively high current ratio is an indication that the firm is liquid and has the ability to
pay its current obligations in time as and when they become due. On the other hand a relatively
low current ratio represents that the liquidity position of a firm is not good and the firm shall not
able to pay its current liabilities in time. Two to one ratio is referred to as a bankers rule of
thumb (or) arbitrary standard of liquidity for a firm.

Current assets include cash and those cab be easily converted into cash within a short
period of time generally, one year such as marketable securities, debtors, inventories, work-in-
progress etc.

Current liabilities are those obligations which are payable within a short period of time
generally one year and include outstanding expenses, bills payable, sundry creditors, accrued
expenses short term advances, income tax etc.

26
 TABLE-4.1

YEAR CURRENT Current Current Rations

ASSETS( I Liabilities( in
n Rs ) Rs
2008-2009 70,02,25,559 26,89,45,929 2.60
2009-2010 81,66,21,470 40,85,67,751 1.99
2010-2011 88,16,89,555 47,55,23,005 1.85
2011-2012 1,09,13,72,587 45,16,07,354 2.41
2012-2013 1,23,95,60,593 56,15,27,841 2.20

CURRENT RATIO
3 2.6
2.41
2.5 2.2
1.99 1.85
2
1.5
CURRENT RATIOS
1
0.5
0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

INFERENCE:
A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its
current obligations in time as and when they become due. On the other hand, relatively low
current ratio represents that the liquidity position of the firm is not good and the firm shall not

27
able to pay its current liabilities in time without facing difficulties. The Standard current ratio is
2:1.

The current ratios are 2.60, 1.99, 1.85, 2.41, & 2.20 for the study period. The standard ratio of
2:1 was observed during all the study period. So, it shows the efficient management of current
assets and current liabilities. Compare to among five years of study period 2008-09 years ratio is
good at 2.60.

4.2. QUICK RATIO

Quick ratio is known as acid test or liquid ratio is a more rigorous test
of liquidity then the current ratio. Then term liquidity raffs to the ability of a firm
to pay its short-term obligations as and when they become due. The two
determinants of current ratio is as a measure of liabilities.

Quick ratio may be current or liquid liabilities. Inventories cannot be

termed to be liquid assets because they cannot be converted into cash immediately
without a sufficient loss of value. The quick ratio can be calculated by dividing the
total of the quick assets by total current liabilities. As a rule of thumb (or) as a
convention quick ratio of 1 is considered satisfactory.

Quick Ratio = Quick Assets/ Current Liabilities

28
 TABLE 4.2
Years Current Inventories Quick Current Quick
Assets ( in RS ) Assets Liabilities Ratio
( in Rs) ( in Rs) ( in Rs)

2008-09 70,02,25,559 34,12,14,224 35,90,11,335 26,89,45,929 1.33

2009-10 81,66,21,470 35,08,55,723 46,57,65,747 40,85,67,751 1.13
2010-11 88,16,89,555 29,60,12,822 58,56,76,733 47,55,23,005 1.23
2011-12 1,09,13,72,587 40,74,52,487 68,39,20,100 45,16,07,354 1.51
2012-13 1,23,95,60,593 51,76,05,839 72,19,54,754 56,15,27,841 1.28

QUICK RATIO
2

1.5 1.51
1.33 1.23 1.28
1.13
1
QUICK RATIOS
0.5

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

29
INFERENCE
The Quick ratio showed a fluctuating trend during the study period. The values are 1.33,
1.13, 1.23, 1.51, & 1.28 respectively. It was observed that the standard ratio of 1:1 was
maintained in the study period. The high quick ratio is an indication that the firm is liquid and
has the ability to meet its current liabilities.

4.3. CASH RATIO

Cash is the most liquid asset a financial analyst may examine cash ratio and its
equivalent to current liabilities. Trade investments or marketable securities are equivalent of
cash therefore they may be included in the computation of cash ratio. Absolutely liquid assets
include cash in hand and at bank and marketable securities; or temporary investment. The
acceptable norm for this ratio is 50% (or) 0.5. It can be calculated as follows

Cash Ratio = (cash +marketable securities)/Current Liabilities

This ratio is also called Absolute Liquidity Ratio or Super Quick ratio.

30
 TABLE 4.3 showing Cash Ratio
Years Cash ( in Rs) Current liabilities Cash Ratio
( in Rs )

2008-09 19,57,15,651 26,89,45,929 0.72

2009-10 31,23,45,581 40,85,67,751 0.76

2010-11 33,43,85,423 47,55,23,005 0.70

2011-12 25,51,32,910 45,16,07,354 0.56

2012-13 28,53,59,727 56,15,27,841 0.50

31
 CASH RATIO
0.72 0.76
0.7
0.56
0.5
0.8
0.6
CASH RATIOS
0.4
0.2
0
2008-20092009-20102010-20112011-20122012-2013
YEARS

INFERENCE: This Ratio indicates the proportion of Cash and Bank balance. i.e. it shows the
ability of a firm to pay its current liabilities by using most liquid assets, Cash and Bank balance.

The Cash Ratios of KARNATAKA SOAPS & DETERGENTS LTD for the period study from
2008-09 to 2012-13 are 0.72, 0.76, 0.70, 0.56, and 0.50 respectively. It is high in 2008-09 to
2010-01. Finally in 2010-11 and 2012-13 the cash ratio was very near to acceptable norm 0.50.
It showed good condition.

32
4.4. NET WORKING CAPITAL RATIO
The difference between the current assets and the current liabilities excluding short-term
bank borrowings is called net working capital. It is sometimes used as a measure of a firms
liquidity.

It is considered that between two firms, the one having the larger networking capital has
greater ability to meet its current obligations. NWC, however, measures the firms potential
reservoir of funds. It can be related to net assets (or capital employed).

This is not necessary so, the measure of liquidity is a relationship, rather than the
difference between Current Assets and Current Liabilities.

Net working capital Ratio = Net working capital/ Net assets

Net working capital= current assets- current liabilities
NWC Ratio = Net working capital/Net assets

33
 TABLE 4.4

Net working capital Net Assets Net working capital

Years
( in Rs ) ( In Rs) Ratio

2008-09 43,12,79,630 49,16,39,785 0.88

2009-10 40,80,53,719 46,69,84,688 0.87
2010-11 40,61,66,550 46,52,21,875 0.87
2011-12 63,97,65,233 70,95,40,993 0.90
2012-13 67,80,32,752 76,38,63,709 0.89

NET WORKING CAPITAL RATIO

0.9
0.89
0.9 0.88
0.89 0.87 0.87
0.88
NET WORKING CAPITAL RATIOS
0.87
0.86
0.85
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
YEARS

INFERENCE:

34
 The NWC ratio of KARNATAKA SOAPS & DETERGENTS LIMITED was
started with 0.88 in the year 2008-2009 and it was decreased same like to another two years to
0.87 in the years 2009-10 and 2010-2011 respectively. The NWC ratio was increased to 0.90 in
the year 2011-2012. In the year 2012-2013 decreased to 0.89. The average NWC ratio of
KARNATAKA SOAPS & DETERGENTS LIMITED is 0.88 for the five years of study
period.

LEVERAGE RATIOS
4.5. TOTAL DEBT RATIO
Several debt ratios may be used to analyze the long term solvency of a firm. The firm
may be interested in knowing the proportion of the interest bearing debt in a capital structure. It
may therefore, compute debt ratio by dividing total debt by capital employed. Capital employed
will include total debt and net worth. Capital employed = ( total debt + net worth)

Debt Ratio = Total Debt/Capital employed

35
36
 TABLE 4.5 showing total debt ratio
Years Total Debt Capital Total
( in Rs) Employed Debt Ratio
( in Rs)

2008-09 19,99,11,435 51,81,32,435 0.38

2009-10 14,66,24,556 47,99,15,849 0.30
2010-11 10,03,60,972 55,54,08,013 0.18
2011-12 19,07,11,112 77,84,20,599 0.24
2012-13 16,35,98,904 82,52,99,050 0.19

Total Debt Ratio

0.38
4
0. 0.3
0.24
0.18 0.19
Total Debt 2
Ratios 0.

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

INFERENCE

37
 The Debt Ratio of KARNATAKA SOAPS & DETERGENTS LIMITED was started
with 0.38 at first year 2008-2009. It was decreased to 0.30, 0.18 in the years 2009-2010, 2010-
2011 respectively. It was again increased to 0.24 in the year 2011-2012. And it was again
decreased to 0.19 in the year 2012-2013. It was efficient management in the study period.

4.6. DEBT EQUITY RATIO

Debt equity ratio is the ratio, which expresses the relationship between debt and equity
or relationship between borrowed capital and owners.

The ratio is determined to ascertain in the proportion between the outsiders funds and
share holders funds in the capital structure of

a enterprise. The terms outsiders funds is generally used to represent total long term debt.

Debt Equity Ratio = Total Debt/Net worth

38
 TABLE 4.6 showing Debt Equity Ratio
Years Total Debt Net Worth Debt Equity Ratio
( in Rs) ( in Rs)

2008-09 19,99,11,435 31,82,21,000 0.62

2009-10 14,66,24,556 33,32,91,293 0.43
2010-11 10,03,60,972 45,50,47,041 0.22
2011-12 19,07,11,112 58,77,09,487 0.32
2012-13 16,35,98,904 66,17,00,146 0.24

Debt Equity Ratio

0.8

0.6 0.62
Debt Equity
Ratio 0.4 0.43
0.32
0.2 0.22 0.24

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

YEARS

39
INFERENCE:
The Debt equity ratio is calculated to measure the extent to which debt financing has
been used in a business. The ratio indicates the proportions claims of owners and the outsiders
against the firms assets.

The Debt Equity ratio of KARNATAKA SOAPS &DETERGENTS LIMITED was

started with 0.62 in the year 2008-2009 and then it was gradually decreasing to 0.43, 0.22, 0.32
and 0.24 in the years 2009-2010, 2010-2011, 2011-12 and 2012-13 respectively. The average
Debt Equity Ratio of KARNATAKA SOAPS AND DETERGENS LIMITED is o.36 during the
study period. It is indicating that the, KS&DL is maintaining sound Debt Equity Ratio.

4.7. CAPITAL EMPLOYED TO NET WORTH RATIO

This ratio is also known as equity ratio. This is yet another way of
expressing relationship between Debt and Equity. This is to know how much funds
are being contributed together by lenders and owners for each rupee of owners
contribution.

Capital Employed to Net Worth Ratio = Capital Employed/ Net Worth

40
41
 TABLE 4.7
Years Capital Net Worth CENW
Employed ( in Rs) RATIO
( in Rs)

2008-09 51,81,32,435 31,82,21,000 1.62

2009-10 47,99,15,849 33,32,91,293 1.43
2010-11 55,54,08,013 45,50,47,041 1.22
2011-12 77,84,20,599 58,77,09,487 1.32
2012-13 82,52,99,050 66,17,00,146 1.24

CAPITAL EMPLOYED TO NET WORTH RATIO

2
1.62
1.43 1.32
1.5 1.22 1.24
1
CETNWR
0.5

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

INFERENCE:
The Capital Employed to Net Worth ratio of KARNATAKA SOAPS & DETERGENTS
LIMITED was started with 1.62 in the year 2008-2009 and it was decreased gradually 1.43,

42
1.22, 1.32, and 1.24, in the years 2009-2010, 2010-2011, 2011-2012 and 2012-2013 respectively.
The average ratio, however good that is 1.36 in the five year of study.

ACTIVITY RATIOS
4.8. INVENTORY TURN OVER RATIO
It indicates whether inventory is efficiently used or not the purpose is to be whether only
the required minimum funds have been locked up to the inventory. This ratio implies number of
times stock has been turned over during a period and evaluates efficiency with which a firm is
able to manage its inventory.

Usually a high inventory turnover ratio indicates efficient management of inventory. A

low efficient management of inventory indicating over investment in inventories, debt business,
poor quality of goods, stock accumulation and low profit as compared to total investment.

Inventory Turnover Ratio = Sales/Inventory

43
44
 TABLE 4.8
Years Sales Inventory Inventory
( in Rs ) ( in Rs) Turn over
Ratio
2008-09 1,10,92,10,600 34,12,14,224 3.25
2009-10 1,19,58,03,294 35,08,55,723 3.40
2010-11 1,45,52,84,544 29,60,12,822 4.91
2011-12 1,69,39,19,368 40,74,52,487 4.15
2012-13 1,78,90,59,796 51,76,05,839 3.45

INVENTROY TURNOVER RATIO

5
4 4.19 4.15
3.4 3.45
3 3.25
INVENTORY TURNOVER RATIOS 2
1
0
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
YEARS

INFERENCE:

45
 The Inventory turnover ratios were 3.25, 3.40, 4.91, 4.15 and 3.45 respectively during
the study period. The average ratio for the period of study is 2008-2009 to 2012-2013is 3.83. It
shows that company was unable to convert its inventory into sales to contribute the profit in the
short period.

4.9. DEBTORS TURN OVER RATIO

Debtors turnover ratio indicates the relationship between sales and average debtors. It
is showing by dividing credit sales. Higher turnover ratio indicated better performance and
lower turnover ratio indicates inefficiency. It includes debtors as well as the bills receivable.

Debtors Turn Over Ratio = Sales / Debtors

46
 TABLE 4.9
Years Sales Debtors Debtors Turn Over
( in Rs) ( in Rs) Ratio
2008-09 1,10,92,10,600 6,88,37,157 16.11
2009-10 1,19,58,03,294 8,08,73,641 14.78
2010-11 1,45,52,84,544 14,63,46,670 9.94
2011-12 1,69,39,19,368 16,35,29,618 10.35
2012-13 1,78,90,59,796 17,26,41,760 10.36

DEBTORS TURNOVER RATIO

20
16.11
14.78
15
9.94 10.35 10.36
10
Debtors Turnover Ratios
5

0
2008-20092009-20102010-20112011-20122012-2013
YEARS

47
INFERENCE:

The debtors turnover ratio of KARNATAKA SOPS & AND DETERGENTS

LIMITED was 16.11 in the year 2008-09.

The ratio had been decreasing from 16.11 to 10.36 in the study period.

The average debtors turnover ratio of KARNATAKA SOAPS AND DETERGENTS

LIMITED is 12.30.

4.10. AVERAGE COLLECTION PERIOD (DAYS)

The average number of days for which debtors remain outstanding is called the
average collection period and can be computed as follows.

The average collection period measures the quality of debtors since it indicates the speed of
their collection. The shorter the average collection period, because short collection period of the
debtors.

Average collection period (days) = 365/ Debtors turnover ratio

48
49
 TABLE 4.10
Years Debtors Turnover Ratio Average COLLECTION
PERIOD(DAYS)
2008-09 16.11 22.65
2009-10 14.78 24.69
2010-11 9.94 36.72
2011-12 10.35 35.26
2012-13 10.36 35.23

AVERAGE COLLECTION PERIOD (DAYS)

2012-2013 35.23
2011-2012 35.26
2010-2011 36.72
YEARS
2009-2010 24.69
2008-2009 22.65

0 5 10 15 20 25 30 35 40
AVERAGE COLLECTION DAYS

INFERENCE:

50
 The average collection period showed increasing trend during the period 2008-2013. It
shows that the company was able to convert its debtors into cash in short period. The average
collection period of Karnataka soaps and detergents limited was 30.91 days for the study
period.

4.11. NET ASSETS TURN OVER RATIO

Assets are used to generate sales. Therefore a firm should manage its assets efficiently to
maximize sales. The relationship between sales and assets is called Net Assets turnover ratio.

Net Assets turnover Ratio = Sales / Net Assets

TABLE 11
Years Sales Net Assets Net Assets Turn
( in Rs) ( in Rs) Over Ratio

2008-09 1,10,92,10,600 49,16,39,785 2.25

2009-10 1,19,58,03,294 46,69,84,688 2.56
2010-11 1,45,52,84,544 46,52,21,875 3.12
2011-12 1,69,39,19,368 70,95,40,993 2.38
2012-13 1,78,90,59,796 76,38,63,709 2.34

NET ASSETS TURNOVER RATIO

4
3 3.12
2.56 2.38 2.34
2 2.25
NET ASSETS TURNOVER RATIOS
1
0
2008-20092009-20102010-20112011-20122012-2013
YEARS

51
 INFE

INFERENCE:
The Net Assets turn Over Ratios of KARNATAKA SOAPS AND DETERGENTS
LIMITED were 2.25, 2.56, 3.12, 2.38, & 2.34 in the years 2008-09, 2009-10, 2010-11,2011-
2012, and 2012-13 respectively. The average of Net Assets Turnover Ratio of KARNATAKA
SOAPS AND DETERGENTS LIMITED was 2.53 during the study period.

4.12. TOTAL ASSETS TURN OVER RATIO

The total assets turnover ratio indicates the firms ability in generating sales
from all financial resources committed to total assets.

Total Assets Turn Over = Sales / Total Assets

TABLE 12

Years Sales Net Fixed Current Assets Total Assets Total

( in Rs) Assets ( in Rs) ( in Rs) Assets
( in Rs) turn
over
Ratio
2008-09 1,10,92,10,600 6,03,60,155 70,02,25,559 76,05,85,714 1.45
2009-10 1,19,58,03,294 5,89,30,969 81,66,21,470 87,55,52,439 1.36
2010-11 1,45,52,84,544 5,90,55,325 88,16,89,555 94,07,44,880 1.54
2011-12 1,69,39,19,368 6,97,75,760 1,09,13,72,587 1,16,11,48,347 1.45

2012-13 1,78,90,59,796 8,58,30,957 1,23,95,60,593 1,32,53,91,550 1.34

52
 TOTAL ASSETS TURNOVER RATIO
1.6
1.54
1.5
1.45 1.45
1.4
TOTAL ASSETS TURNOVER RATIOS 1.36 1.34
1.3
1.2
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

INFERENCE:
Total Turnover Ratios of the years 2008-2009, 2009-2010, 2010-2011, and 2011-2012 are
1.45, 1.36, 1.54, 1.45, and 1.34 respectively. The average total assets turnover ratio of
KARNATAKA SOAPS AND DETERGENTS LIMITED was 1.42 during the study period.

4.13. FIXED ASSETS TURN OVER RATIO

This ratio is calculated by dividing Net Sales into Net fixed assets. This ratio
expressed the number of times fixed assets are being turnover in a stated period. This
ratio shows how well the fixed assets are being used in business. Fixed assets turnover
ratio is the ratio between net sales and fixed assets. It indicates as to what extent the
fixed assets have been utilized.

53
 The higher ratio is shows that better utilization of the plants and
equipment. Low ratio indicates that fixed assets are not being efficiently utilized. The
ideal fixed assets turnover ratio is 5 times. When fixed assets turnover is 5 times or more,
indicates better utilization of fixed assets.

Fixed Assets Turn Over Ratio = Net Sales / Net Fixed Assets

TABLE 4.13 showing fixed assets turnover Ratio

Years Net Sales Net Fixed Fixed Assets Turn Over

( in Rs) Assets Ratio
( in Rs)
2008-09 98,81,11,423 6,03,60,155 16.37
2009-10 1,04,43,74,470 5,89,30,969 17.72

54
2010-11 1,28,64,62,008 5,90,55,325 21.78
2011-12 1,53,37,03,531 6,97,75,760 21.98
2012-13 1,64,77,74,737 8,58,30,957 19.19

FIXED ASSETS TURNOVER RATIO

2012-2013 19.19

2011-2012 21.98

2010-2011 21.78
YEARS
2009-2010 17.72

2008-2009 16.37

0.00 5.00 10.00 15.00 20.00 25.00

FIXED ASSETS TURNOVER RATIOS

INFERENCE
The Fixed Assets Turnover Ratios of KARNATAKA SOAPS AND
DETERGENTS LIMITED were 16.37, 17.72, 21.78, 21.98 and 19.19 in the years of study
period. The average of this ratio was 19.40 during the study period from 2008-09 to 2012-13.
The above analysis is indicating that the fixed assets turnover ratio is more than 5 times for the
period 2006-07 to 2012-13. It indicates that the company fixed assets has been utilizing
effectively in the concern, and has put fixed assets into good use.

55
 4.14. CURRENT ASSETS TURN OVER RATIO
The ratio is calculated by dividing sales into current assets. This ratio expressed the
number of times current assets are being turnover in a stated period. This ratio shows how well
the current assets are being used in business. The higher ratio is showing that better utilization of
the current assets or else a low share indicates that current assets are not being efficiently
utilized.

Current Assets Turn Over Ratio = Sales / Current Assets

56
57
 TABLE 4.14
Years Sales Current Assets Current Turnover
( in Rs) ( in Rs) Ratio
2008-2009 1,10,92,10,600 70,02,25,559 1.58
2009-2010 1,19,58,03,294 81,66,21,470 1.46
2010-2011 1,45,52,84,544 88,16,89,555 1.65
2011-2012 1,69,39,19,368 1,09,13,72,587 1.55
2012-2013 1,78,90,59,796 1,23,95,60,593 1.44

CURRENT ASSETS TURNOVER RATIO

1.7
1.65
1.6
1.55
1.5
CURRENT ASSETS TURNOVER RATIOS 1.65
1.45 1.58 1.55
1.4
1.46 1.44
1.35
1.3
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

YEARS

58
INFERENCE:
The current Assets Turn Over Ratio of KARNATAKA SOAPS AND DETERGENTS
LIMITED were 1.58, 1.46, 1.65, 1.55, and 1.44 respectively in the study period from 2008-09 to
2012-13. There were fluctuations in the Current Assets Turnover ratio during the study period.
The average current assets turnover ratio of KARNATAKA SOAPS AND DETERGENTS
LIMITED is 1.53 during the study period.

4.15. WORKING CAPITAL TURN OVER RATIO

This is also known as working capital leverage ratio or sales to capital

employed ratio. The ratio indicates that whether working capital has been
effectively utilized or not in making sales.

If the firm can achieve higher volume of sales with relatively small amount
of working capital, then it is an indication of the operating efficiency of the
company. The ratio is calculated as follows

Working capital turnover ratio = Net Sales / Net Current assets

59
60
 TABLE 4.15
Years Net Sales Net Current Working Capital
( in Rs) Assets Turn over Ration
( in Rs)
2008-2009 98,81,11,423 43,12,79,630 2.29
2009-2010 1,04,43,74,470 40,80,53,719 2.55
2010-2011 1,28,64,62,008 40,61,66,550 3.16
2011-2012 1,53,37,03,531 63,97,65,233 2.39
2012-2013 1,64,77,74,737 67,80,32,752 2.43

WORKING CAPTIAL TURNOVER RATIO

3.5
3 3.16
2.5 2.55
2.29
2 2.39 2.43
1.5
WORKING CAPITAL TURNOVER RATIOS
1
0.5
0
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

YEARS

61
INFERENCE:
The Working Turn Over Ratios of KARNATAKA SOAPS AND
DETERGENTS LIMITED are 2.29, 2.55, 3.16,2.39, and 2.43 in the years 2008-09, 2009-10,
2010-11, 2011-12, and 2012-13 respectively. It was increased from 2.29 to 3.16 in the years
from 2008-2009 to 2010-2012, then decreased to 2.43 in the year 2012-13. The average of
working capital turnover ratio is 2.56 during the study period. The working capital turnover ratio
shows an increasing tendency. So it shows the working capital turnover ratio of the company is
satisfactory. Which means the firm generates through sales is satisfactory.

PROFITABILITY RATIOS
4.16. GROSS PROFIT RATIO
The gross profit margin reflects the affiance with the management produces
each unit of profit. The ratio indicates the average spread between cost of goods sold and the
revenue. A high gross profit margin is a sign of good management. Also, a high profit margin
relative to industry average implies that the firm is able to produce at relatively low cost. Thus

Profit Ratio = Gross profit / Sales * 100Gross

62
63
 TABLE 4.16
Years Gross Profit Sales Gross Profit
( in Rs) ( in Rs) Ratio (%)
2006-2007 2,36,78,619 1,10,92,10,600 2.13
2007-2008 4,33,57,146 1,19,58,03,294 3.62
2008-2009 11,79,35,440 1,45,52,84,544 8.10
2009-2010 11,70,84,989 1,69,39,19,368 6.91
2010-2011 13,48,85,857 1,78,90,59,796 7.53

GROSS PROFIT RATIO

10

8 8.1
7.53
6.91
6
GROSS PROFIT RATIOS 4 3.62
2 2.13

0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEARS

INFERENCE:

64
 The Gross profit ratios were 2.13, 3.62, 8.10, 6.91, and 7.53 in the years 2006-07,
2007-08, 2008-09, 2009-10, and 2010-11 of study period. It was very low in 2005-06 at 2.13.
The average gross profit ratio is 5.65 in the study period.

The increasing trend in the gross profit ratio during the study period might be due to
decrease in the cost of goods sold.

4.17. NET PROFIT RATIO

It establishes a relationship between net profit and sales and, it indicates
management efficiency in manufacturing, administrating and selling products and is expressed as
a percentage. The higher the net profit ratio, higher the greater will be the profitability and
higher return to the share holders as well as enable the firm to withstand adverse economic
conditions. On the other hand, a lower net profit ratio is an indication of poor profitability of an
enterprise.

Net profit margin is obtained when operating expenses, interest, taxes are subtracted from
the gross profit. The net profit margin is calculated as follows

Net Profit Ratio = Net profit after tax / Net sales * 100

65
 TABLE 4.17 showing Net Profit Ratio
Years Profit After Tax Net Sales Net Profit (%)
( in Rs) ( in Rs)

2006-2007 1,78,78,814 98,81,11,423 1.80

2007-2008 3,58,55,694 1,04,43,74,470 3.43
2008-2009 8,82,39,809 1,28,64,62,008 6.85
2009-2010 11,68,14,479 1,53,37,03,531 7.61
2010-2011 9,31,12,149 1,64,77,74,737 5.65

NET PROFIT RATIO

8.00 7.61
6.85
6.00 5.65
4.00
NET PROFIT RATIOS 3.43
2.00 1.80

0.00
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
YEARS

66
INFERENCE:

The Net profit ratio in the year 2006-07 was 1.80%, it was increased gradually to
7.61 in the year 2009-10. The ratios in the years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-
11 were 1.80, 3.43, 6.85, 7.61, and 5.56 respectively.

From the above analysis, the percentage of net profit ratio is increasing year after year.
This shows that the company is in a good economic position. But in the year 20010-11 the net
profit ratio is decreased by 2.05

4.18. EARNING PER SHARE

Earnings per share show the profitability of the firm on a per share basis. It does
not reflect how much is paid as dividend how much is retained in the business.

Earnings per share = Profit after tax / Number of shares * 100

TABLE 4.18
Years Profit After Tax No of Shares Earnings Per Share
( in Rs) yet t b*100
(%)
2006-2007 1,78,78,814 3,18,221 56.18
2007-2008 3,58,55,694 3,18,221 112.67
2008-2009 8,82,39,809 3,18,221 277.29
2009-2010 11,68,14,479 3,18,221 367.08
2010-2011 9,31,12,149 3,18,221 292.60

67
 EARNINGS PER SHARE RATIO
400
367.08
300 292.60
277.29
200
EARNINGS PER SHARE RATIOS
100 112.67
56.18
0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
YEARS

INFERENCE:
The earnings per share for the years 2006-07, 2007-08, 2008-09, 2009-10, and
2010-11 are 56.18, 112.67, 277.29, 367.08 and 292.60 respectively. Comparatively the ratio

gradually increasing, this might be due to increase in PAT and sales.

4.19. OVERA ALL PROFITABILITY RATIO

68
 The overall profitability ratio indicates the speed at which the capital employed
in the business rotates. Higher the rate of return greater will be the profitability. The ratio is
calculated as follows

Overall profitability ratio = Operating profit / operating Assets * 100

Operating profit is obtained when operating expenses are deducted from gross
profit.

Operating assets is obtained when surplus carried to balance sheet is added to

the assets.

69
 TABLE 4.19
Years Operating Profit Operating Assets Overall Profitability
( in Rs ) ( in Rs) Ratio
(%)
2008-2009 2,90,67,487 76,05,85,714 3.82
2009-2010 4,80,05,540 87,55,52,439 5.48
2010-2011 12,24,44,174 94,07,44,880 13.01
2011-2012 12,43,61,250 1,16,11,48,347 10.71
2012-2013 14,31,83,402 1,32,53,91,550 10.80

OVER ALL PROFITABILITY RATIO

14 13.01
12
10.71 10.80
10
8
OVER ALL PROFITABILITY RATIOS 6 5.48
4 3.82
2
0
2008-20092009-20102010-20112011-20122012-2013

YEARS

INFERENCE:

70
 The overall profitability ratio in the year 2008-09 was 3.82%. The ratios followed a
increasing trend with 5.48%, 13.01%, 10.71%, and 10.80% in the years 2009-10, 2010-11, 2011-
12, and 2012-13 respectively. The average overall profitability ratio of KARNATAKA SOAPS
AND DETERGENTS LIMITED is 8.76 during the study period.

4.20. CASH PROFIT MARGIN

The cash profit margin is calculated as, cash profit is the profit before interest, depreciation and
tax.

Cash Profit Ratio = Cash profit / Net sales * 100

TABLE 4.20
Years Cash Profit Net Sales Cash Profit
( in Rs) ( in Rs) Ratio ( % )

2008-2009 3,25,50,419 98,81,11,423 3.29

2009-2010 5,16,10,556 1,04,43,74,470 4.94
2010-2011 12,60,21,604 1,28,64,62,008 9.79
2011-2012 12,83,30,288 1,53,37,03,531 8.36
2012-2013 14,81,65,877 1,64,77,74,737 8.99

CASH PROFIT MARGIN

15

10 9.79 8.99
8.36
CASH PROFIT MARGIN
5 4.94
3.29
0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

71
 INFERENCE:
It is inferred from the above table that the cash profit margin shows a gradually
increasing trend during the study period. There was a very low margin in the year 2008-09 with
a ratio of 3.29% when compared to 9.79% ratio in the year 2010-11. The ratios of 2008-09,
2009-10, 2010-11, 2011-12, and 2012-13 are 3.29%, 4.94%, 9.79%, 8.36% and 8.99 respectively.
The average cash profit margin is 7.07% during the study per

4.21. OPERATING PROFIT MARGIN

Operating profit is obtained when operating expenses are subtracted from gross profit.

Operating profit margin = Operating profit / Sales *10

TABLE4.21
Operating Profit Net Sales Operating Profit
Years ( in Rs ) ( in Rs) margin Ratio
(%)
2008-2009 2,90,67,487 98,81,11,423 2.94
2009-2010 4,80,05,540 1,04,43,74,470 4.59
2010-2011 12,24,44,174 1,28,64,62,008 9.51
2011-2012 12,43,61,250 1,53,37,03,531 8.10
2012-2013 14,31,83,402 1,64,77,74,737 8.68

72
 OPERATING PROFIT MARGIN
10
9.51 8.10
5 4.59
OPERATING PROFIT MARGING
2.94 3.00
0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
YEARS

INFE

INFERENCE:
The operating profit margin ratios for the study period are 2.94%, 4.59%, 9.51%, 8.10%
and 8.68 for the years 20008-09, 2010-11, 2010-11, 2011-12 and 2012-13 respectively. The
average operating profit ratio is 6.76%. The trend represents that the performance was not better.

73
4.22. OPERATING EXPENSES TO SALES RATIO
The ratio explains the changes in the profit margin (EBIT TO Sales) ratio.

Operating expenses include all expenses such as depreciation, salary and

benefits, selling distribution and other administrative expenses.

Operating expenses = Operating expenses / Sales * 100

TABLE 4.22
Operating expenses Net Sales Operating Expenses
Years ( in Rs ) ( in Rs) to Sales Ratio( % )
2008-2009 85,94,56,599 98,81,11,423 86.97
2009-2010 1,06,26,82,573 1,04,43,74,470 101.75
2010-2011 1,15,85,36,413 1,28,64,62,008 90.05
2011-2012 1,54,03,40,291 1,53,37,03,531 100.43
2012-2013 1,58,01,65,818 1,64,77,74,737 95.89

OPERATING EXPENSES TO SALES RATIO

105 101.75 100.43
100 95.89
95
90.05
90 86.97
OPERATING EXPENSES TO SALES RATIOS
85
80
75
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
YEARS

74
INFERENCE:
The operating expenses to sales ratios are 86.97%, 101.75%, 90.05%, 100.43% and
95.89% in the years 2009-10, 2009-10, 2010-11, 2011-12, and 2012-13 of the study period.

The average operating expenses to sales ratio is 95.01% during the study period.

4.23. RETURN ON TOTAL ASSETS

Return on Total Assets = PATAI / Total Assets * 100

This ratio indicates the operating efficiency of the firm.

TABLE 4.23
Years PATAI Total Assets Return on Total
( in Rs ) ( in Rs) Assets Ratio (%)

2008-2009 1,78,78,814 76,05,85,714 2.35

2009-2010 3,58,55,694 87,55,52,439 4.09
2010-2011 8,82,39,809 94,07,44,880 9.37
2011-2012 11,68,14,479 1,16,11,48,347 10.06
2012-2013 9,31,12,149 1,32,53,91,550 7.02

OPERATING EXPENSES TO SALES RATIO

15
9.37 10.06
10
2.35 4.09 7.02
5
OPERATING EXPENSES TO SALES RATIOS
0
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
YEARS

75
INFERENCE:
Returns on total Assets are 2.35%, 4.09%, 9.37%, 10.06% and 7.02 in the years 2008-09,
2009-10, 2010-11, 2011-12 and 2012-13 of study period. This trend shows that very less return
on assets.

4.24. RETURN ON NET WORTH

This ratio indicates how well the firm has used the resources of owners, and
hence there is one of the most important relationships in financial analysis.

The ratio is calculated as

Return on Net worth = PATAI / Net worth * 100.

Net worth includes share capital and reserve surplus.

TABLE 4.24
Years PATAI Net Worth Return on Net worth
( in Rs) ( in Rs) Ratio (%)
2008-2009 1,78,78,814 31,82,21,000 5.61
2009-2010 3,58,55,694 33,32,91,293 10.75
2010-2011 8,82,39,809 45,50,47,041 19.39
2011-2012 11,68,14,479 58,77,09,487 19.87
2012-2013 9,31,12,149 66,17,00,146 14.07

76
 25

20 19.39 19.87

15 14.07
10 10.75

5 5.61

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
RETURN ON NET WORTH RATIO

INFERENCE:
The return on Net worth ratio for the study period ranged from 5.61% to 19.87% for the years
2008-09 to 2011-12.

The average return on net worth ratio for the above study period is 13.93%.

4.25. OPERATING EXPENSES TO TOTAL COST

Operating expenses include direct labour and overheads. The operating expenses form a part of
total cost. So this gives the ratio operating expenses in total cost. It is found as

Operating Expenses to total cost = Operating expenses / Total cost*100

TABLE 4.25

77
Years Operating Expenses Total cost Operating Expenses
( in Rs) ( in Rs) to Total cost Ratio
(%)
2008-2009 85,59,73,667 87,06,45,272 98.31
2009-2010 1,05,90,77,557 1,07,48,32,419 98.53
2010-2011 1,15,49,58,983 1,19,27,40,778 96.83
2011-2012 1,53,63,71,253 1,58,86,03,698 96.71
2012-2013 1,57,51,83,344 1,64,80,97,822 95.57

OPERATING EXPENSES TO TOTAL SALES RATIO

99
98.31 98.53
98
96.83 96.71
97
OPEATING EXPENSES TO TOTAL SALES RATIOS 96 95.57

95

94
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013

YEARS

INFERENCE:
The Operating expenses to total cost ratios for the years 2008-09, 2009-10, 2010-11,
2011-12, and 2012-13 are 98.31%, 98.53%, 96.83%, 96.71% and 95.57 respectively. The ratios
followed a decreasing trend in operating expenses because of increase in total cost of
KARNATAKA SOAPS AND DETERGENTS LIMITED.

78
The average of the ratio for the above study period is 97.19.

79
 ANNEXURE

PROFIT & LOSS ACCOUNT

PARTICULARS SCD 2008-09 2009-10 2010-11 2011-12 2012-13

INCOME
Sales L 98,81,11,423 1,04,43,74,470 1,28,64,82,008 1,53,37,03,531 1,64,77,74,373
Other income L 1,72,20,084 1,90,04,300 1,89,49,000 3,01,01,090 5,85,50,014
1,00,53,31,507 1,06,33,78,770 1,30,54,31,008 1,56,38,04,621 1,70,63,24,751
Increase(Dec.) in M (-)11,68,07,421 4,73,09,343 82,52,78,136 25,85,28,304 49,53,55,392
stocks
TOTAL 88,85,24,086 1,11,06,88,113 2,13,07,09,144 4,14,90,88,432 6,20,16,80,143

EXPENDITURE
Materials N
consumed(including
trading items)
Other expenditure O 48,87,35,280 55,19,82,573 62.20,12,600 69,32,10,656 72,17,45,654
Depreciation D 34,82,932 36,05,016
85,94,56,599 1,06,26,82,573 1,15,85,36,413 1,54,03,40,291 1,58,01,65,818
Operating 2,90,67,487 4,80,05,540 12,24,44,174 12,43,61,250 14,31,83,402
profit/loss
Interest and P
financial Charges
Profit before tax 2,36,78,619 4,33,57,146 5,37,60,130 6,20,33,120 7,26,32,150
Provision for 57,99,805 75,01,452 3,44,79,679 5,47,81,856 2,04,79,999
taxation
Profit after tax 1,78,78,814 3,58,55,694 8,82,39,809 11,68,14,976 9,31,12,149
Prior period Q 23,67,245 66,40,866
income/(-
expenditure)
Income tax . 2,20,99,794 3,16,86,562 4,20,56,321 5,56,66,478
provision written
back
Profit /loss brought
forward from
previous year
Profit/Loss carried (-)2,55,72,563 1,50,70,293 2,04,79,999 3,44,79,679 5,47,81,856
forward to balance
sheet

BALANCE SHEETS

80
PARTICULARS SC 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
D
SOURCES FO
FUND
1.Shareholders funds
a)Share capital A 31,82,21,00 31,82,21,00 45,50,45,04 58,77,09,487 66,17,00,146
0 0 1
b)Reserve & Surplus
2.Loan funds
a)Secured loans B
b)Unsecured loans C 19,99,11,43 12,99,95,45 10,03,60,97 19,07,11,112 16,35,98,904
5 6 2
TOTAL 51,81,32,43 47,99,15,84 55,54,08,01 77,84,20,599 82,52,99,050
5 9 3
APPLICATION OF
FUNDS
1.Fixed assets D
a)Gross block
b)Less: Depreciation
c)Net block 6,03,60,155 5,89,30969 5,90,55,325 6,97,75,760 8,58,30957
2.Investments E 100 100 100 100 100
3.CURRENTASSET
S, LOANS
ANDADVANCES
a)Inventories F 34,12,14,22 35,08,55,72 29,60,12,82 40,74,54,487 51,76,05,839
4 3 2
b)Sundry debtors G 6,88,37,157 8,08,73,641 14,63,46,67 16,35,29,618 17,26,41,760
0
c)Cash &bank balance H 19,57,15,65 31,23,45,58 33,43,85,42 25,51,32,910 28,53,59,727
1 1 3
d)Loans & advances I 9,44,58,227 7,25,46,525 78,15,69,65 1,09,12,32,52 1,15,85,40.93
5 7 6
70,02,25,55 81,66,21,47 88,16,89,55 4,09,13,72,58 1,23,95,60,59
9 0 5 7 3
CURRENT K
LIABILITIES
a)Current liabilities 17,07,06,35 29,26,24,24 47,55,23,00 45,16,07,384 56,15,27,841
7 3 5
b)Provisions 9,82,39,572 11,59,43,50
8
NET CURRENT 43,12,79,63 40,80,53,71 40,61,66,55 63,97,65,233 67,80,32,752
ASSETS 0 9 0
4.a)Miscellaneous exp. 2,11,66,046 1,29,31,061 6,93,56,455 18,81,57,879 11,65,04,911
(or adjusted)
b)Profit and loss a/c 53,26,504
TOTAL 51,8132,435 47,99,15,84 55,54,08,01 44,84,20,599 82,52,99,050
9 3

81
 CHAPTER 5

FINDINGS

1. The current ratios are 2.60, 1.99, 1.85, 2.41 and 2.20 for the study period. The standard
ratio of 2:1 was observed mostly during the study period. So, it shows the efficient
management of current assets and current liabilities.
2. The quick ratio of Karnataka soaps and detergents limited showed fluctuations with an
average of 1.29. It was above standard ratio of 1:1 for the entire period. It confirms that
the liquidity position of the Karnataka soaps and detergents limited in terms of quick ratio
was more than the standard ratio. The high quick ratio is an indication that the firm is
liquid and has the ability to meet its current liabilities.
3. For the years 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 the cash ratios are 0.72,
0.76, 0.70, 0.56, and 0.50 respectively.
4. The Net working capital ratio showed a fluctuating trend.
5. Debt ratio showed decreasing trend for the study period, as 0.62, 0.43, 0.22, 0.32 and
0.24 showing a positive sign.
6. The Debt equity ratio showed decreasing, because of increase in growth, as 0.38, 0.30,
0.18, 0.24 and 0.19 respectively in the study period.
7. The Total assets turnover ratio was fluctuating year by year i.e.. 1.45, 1.36, 1.54, 1.45 and
1.34. This is due to the reason that the trend of sales is not proportionate to the trend of
total assets.
8. The Inventory turnover ratios were 3.25, 3.40, 4.91, 4.15 and 3.45 during the study
period. It shows that the company was unable to convert its inventory into sales to
contribute the profit in the short period.
9. Debtors turnover ratios were 16.11, 14.78, 9.94, 10.35 and 10.36 for the study period.
10. Net Assets turnover ratio was also fluctuating year by year i.e., 2.25, 2.56, 3.12, 2.38, and
2.34 for the study period.
11. The fixed assets occupied less percentage when compared to current assets in the capital
employed.
12. The current assets turnover ratios were fluctuating for the study period as 1.58, 1.46,
1.65, 1.55 and 1.44.
13. The average collection period showed increasing trend during the period 2005-2010. It
shows that the company was unable to convert its debtors into cash in short period.

82
SUGGESTIONS:
The company is suggested to improve the net profit by increasing the
volume of sales as it is found that sales percentage is fluctuating over the
years.
The company performance is largely dependent on the performance of the
industry.
Manufacturing expenses are to be controlled to increase the gross profit.
The company has to reduce the long-term debt to improve the profitability.
The management should relay on internal funds than external funds which
make the company strong in financial solvency.
The firm is investing most of the debt funds in improving the fixed assets it
will be suggestible to continue the same to have a financial soundness.

83
 BIBLIOGRAPHY
BOOK NAME
FINANCIAL I.M.PANDEY Tata Mc Graw 10th Edition
Hill Co.Ltd
MANAGEMENT
Financial M.Y.Khan & Tata Mc Graw 6th Edition
Management P.K.Jain Hill Co. Ltd
Elements of Kedarnath Pradeep Kumar
Financial
Ramnath & Co
Management
Meerut

Web site:

www.mysoresandal.co.in

84
85